“In the short run, the market is a voting machine, but in the long run it is a weighing machine.” — Benjamin Graham

Welcome to 2026. The year behind us delivered a rare and encouraging combination: steady economic growth, easing inflation, and strong market returns—even as headlines often suggested the opposite. It served as a reminder that market progress usually unfolds gradually, and often amid uncertainty rather than perfect clarity.

How 2025 Finished

U.S. equities closed out another strong year, led once again by large‑cap technology and AI‑focused companies. While performance was broadly positive across major indices, leadership remained concentrated—highlighting the ongoing importance of diversification and selectivity.

For the year:

• S&P 500: +16.39%
• Nasdaq 100: +20.17%
• Dow Jones Industrial Average: +12.97%

Encouragingly, market participation broadened in the final months of the year, with gains extending beyond the largest technology names. This widening of leadership is a constructive sign as we look ahead.

Rates, Inflation, and the Economy

The Federal Reserve delivered three quarter‑point rate cuts in 2025, shifting away from the “higher for longer” stance that defined the previous year. Inflation continued easing into the high‑2% range while economic growth held near 2%.

For investors, this meant that bonds finally began acting like bonds again. High‑quality fixed income generated positive returns and resumed its role as a source of stability and income. Lower‑quality credit required more selectivity, while the housing market remained tight—modestly lower mortgage rates were not enough to offset affordability challenges driven by limited supply.

Policy, Geopolitics, and Volatility

Instead of a single defining event, 2025 brought a steady stream of policy uncertainty, tariff activity, and geopolitical friction. These forces periodically stirred volatility, but markets largely looked through the noise—rewarding strong earnings, solid balance sheets, and durable long‑term fundamentals.

Looking Ahead to 2026

The base case entering 2026 remains a soft landing: modest growth, inflation slowly drifting toward target, and a cautious pace of further rate cuts. At the same time, rising tariffs, persistent fiscal imbalances, and a maturing AI investment cycle suggest this is a time for discipline over exuberance.

For long‑term investors, the core playbook continues to hold: stay diversified, focus on quality and cash flow, and treat periods of volatility as opportunities—not reasons to abandon a thoughtful, well‑constructed plan.

As always, Clare Market Investments is here to help you navigate the coming year with clarity and confidence. If you’d like to review your portfolio or discuss your broader financial planning goals, we’re just a conversation away.

Onward & Upward.